Nike Earnings: Margins Suffer for Five Quarters Straight, Profit Drops

S&P 500 (NYSE:SPY) component Nike Inc. (NYSE:NKE) reported its results for the first quarter. Nike designs and markets high-quality footwear, apparel, equipment, and accessory products throughout the world.

Investing Insights: Will New Apple Products Continue to PUMP UP Shares?

Nike Inc. Earnings Cheat Sheet

Results: Net income for Nike Inc. fell to $567 million ($1.23 per share) vs. $645 million ($1.36 per share) a year earlier. This is a decline of 12.1% from the year-earlier quarter.

Revenue: Rose 9.7% to $6.67 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Nike Inc. beat the mean analyst estimate of $1.13 per share. It beat the average revenue estimate of $6.51 billion.

Quoting Management: “We had a strong first quarter and a great start to the fiscal year. NIKE, Inc. delivered an amazing array of innovation across some of the biggest moments in sport,” said Mark Parker, President and CEO, NIKE, Inc. “Innovation is how great companies sustain growth and build competitive separation. We’ll continue to make strategic investments across our portfolio of businesses to capture our full potential over the long term and drive shareholder value.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.8 percentage point to 43.5% from the year-earlier quarter. In that span, margins have contracted an average of 1.9 percentage points per quarter on a year-over-year basis.

Revenue has increased for four consecutive quarters. Revenue increased 12.2% to $6.47 billion in the fourth quarter of the last fiscal year. The figure rose 15.1% in the third quarter of the last fiscal year from the year earlier and climbed 18.4% in the second quarter of the last fiscal year from the year-ago quarter.

The company’s net income has fallen in each of the last two quarters. In the fourth quarter of the last fiscal year, net income fell 7.6% from the year-earlier quarter.

The company topped expectations last quarter after falling short of forecasts in the fourth quarter of the last fiscal year with net income of $1.17 versus a mean estimate of net income of $1.37 per share.

Looking Forward: For the next quarter, analysts are growing pessimistic about the company’s expected results. The average estimate for the second quarter is $1.01 per share, dropping from $1.18 a month ago. For the fiscal year, the average estimate has moved down from $5.78 a share to $5.14 over the last thirty days.

Stocks with improving earnings metrics are worthy of your extra attention. In fact, “E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our CHEAT SHEET investing framework for this very reason. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

Don’t Miss These Additional Hot Stories:

Caterpillar Outlook: Hidden Signal for Higher Gold and Silver Prices?

Google Won’t Rescue Stranded iOS 6 Users

Is McDonald’s Stock a Buy Now?

More from The Cheat Sheet